How Eskom’s proposed price overhaul will impact Pretoria residents

City of Tshwane’s (CoT) residents will be affected by Eskom’s proposed electricity tariff changes, a municipal spokesperson has confirmed.

“The proposed changes will indirectly impact the City’s residents as 74-76% of the City’s tariff increases are direct pass-through for bulk purchases from Eskom,” the spokesperson said.

Tshwane said it supports the idea of cost-reflective Eskom tariffs and the proposal to do away with inclined block tariffs (IBT).

IBTs divide electricity prices into usage blocks, similar to South Africa’s income tax brackets. The more electricity your household consumes, the more you pay per kilowatt-hour.

“The proposed tariff changes provide for cost-reflective tariffs which will clearly show what the City is paying from generation to retail levels,” the CoT spokesperson said.

“The removal of IBT and introduction of [a] flat rate for indigent and lifeline customers is supported as it will assist customers or residents to buy electricity on single rates as opposed to 4 different tariffs (current scenario).”

Currently, Eskom collects revenue from electricity tariffs based on the multi-year price determination (MYPD) methodology.

The power utility argues that there is currently no link between the charges raised and the Nersa-approved cost per division.

Eskom is busy unbundling its operations into separate entities, namely Eskom Holdings, Distribution, Transmission and Generation.

It recently released tools to help South Africans calculate how much they can expect to pay under the proposed power tariffs.

Under its revised Homepower price plan, Eskom shows that its fixed grid connection fee will increase substantially, while variable consumption charges decrease.

Households on its Homepower 1 price plan that don’t use any electricity will pay R938 per month just for connecting to the grid — up from R218.

Homes using between 800kWh and 900kWh per month should pay about the same as they currently do, while those who use more would pay less.

This has raised concerns from people who have switched to generating their own solar power and only use the grid as a backup.

If approved, the proposed tariff changes will also impact the City’s costs. The spokesperson said it actively participated in South African Local Government Association consultations on Eskom’s Multi-Year Price Determination (MYPD).

They said the impact on the City will directly result from its bulk electricity purchases from Eskom and added that it is prudent for Eskom to unbundle its tariffs.

“Local Government consumes over 46% of Eskom electricity. Therefore, the proposed increases will have [an] impact on City as 74-76% of the City’s tariffs increase is for bulk purchases from Eskom,” they said.

“With [the] electricity sector landscape changing and the ongoing restructuring of Eskom, [combined with] a lot of unknown factors, it is prudent for Eskom to start to unbundle its tariffs to reflect the cost of generation separate from transmission and distribution.”

Eskom submitted its tariff restructuring application to the National Energy Regulator of South Africa (Nersa) on 5 August 2022.

Eskom provided three reasons why restructuring the current tariff structure was necessary.

“Firstly, the different tariff rates no longer reflect the different services being provided — that is, they are not aligned with energy, network and retail costs — because of the application of average price increases,” Eskom said.

Further grounds for its restructure proposal include needing to make charges more reflective of the costs per division due to the imminent unbundling of Eskom and an evolving energy industry.

Eskom said tariff structures also need to adapt to protect all customer interests and to ensure adequate recovery of Nersa-approved revenue.

The power utility expects the changes, if approved, to result in a slight decline in revenue of R2 billion overall — which is a relatively flat decrease considering an overall revenue of roughly R247.8 billion.

On average, the utility has calculated that revenue from residential tariffs would decrease slightly by 0.81% — a reduction of R131 million.

Now read: Eskom wants a 32% power price hike

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How Eskom’s proposed price overhaul will impact Pretoria residents